The Limits of Discretion? Self-Judging Emergency Clauses in International Investment Agreements

The Limits of Discretion? Self-Judging Emergency Clauses in International Investment Agreements, Yearbook of International Investment Law and Policy 362 (with Michael Nolan; Karl Sauvant ed.: Oxford University Press, 2011).

57 Pages Posted: 20 Oct 2017 Last revised: 29 Nov 2017

See all articles by Michael D. Nolan

Michael D. Nolan

Milbank, Tweed, Hadley & McCloy

Frederic G. Sourgens

Washburn University - School of Law

Date Written: June 19, 2011

Abstract

The discretion accorded to states by international investment agreements in responding to (financial) crises is a topic of ongoing debate in this Investment Yearbook and beyond. The United States’ policy response has included “self-judging” clauses in its recent investment treaties. These clauses provide that each respective treaty does not preclude the United States from applying certain measures the United States “considers necessary” for the protection of its own essential security interests. Other capital exporting countries have combined such so-called “self-judging” clauses with additional mechanisms to carve out certain measures from the protections extended by treaty. Clauses of this kind have yet to be tested in international investment arbitration.

The arbitral decisions arising out of the 2001–2002 Argentine financial crisis are the first BIT awards to touch upon the potential effect of “self-judging” clauses. All the decisions rejected Argentina’s contention that the non-precluded measures clause in Argentina’s international investment treaty with the United States was “self-judging.” The decisions nevertheless addressed the potential effect of “self-judging” clauses: One tribunal stated that such a clause means that “the State adopting the measures in question is the sole arbiter of the scope and application of that rule.” Another tribunal concluded that pursuant to such clauses, “each party will be the sole judge of when the situation requires measures of the kind envisaged by the Article, subject only to a determination of good faith by tribunals that might be called upon to settle a dispute on this point.”

This article surveys non-precluded measures clauses in various international investment treaty programs. After that survey, it addresses two questions: to what extent do “self-judging” non-precluded measures clauses make the State adopting a measure the sole arbiter whether a measure is exempted from the treaty? If the State is not literally the sole arbiter, what does it mean for a non-precluded measures clause to be “self-judging?” The article will conclude that too much has been made of the term “self-judging.” In the majority of instances, tribunals will be able to review the invocation of such “self-judging” clauses — the question is how and when. Easy assumptions about the “self-judging” nature of clauses may place too great an emphasis on labels or shorthand classifications at the expense of interpreting all the words in a treaty provision at hand. Rather then rely on the characterization of a clause as “self-judging,” this article concludes, a tribunal will be required by invocation of such a provision to engage in an application of the treaty in good faith in its context and in light of its object and purpose.

Keywords: investment law; international law; self-judgment; non-precluded measures

Suggested Citation

Nolan, Michael D. and Sourgens, Freddy G., The Limits of Discretion? Self-Judging Emergency Clauses in International Investment Agreements (June 19, 2011). The Limits of Discretion? Self-Judging Emergency Clauses in International Investment Agreements, Yearbook of International Investment Law and Policy 362 (with Michael Nolan; Karl Sauvant ed.: Oxford University Press, 2011).. Available at SSRN: https://ssrn.com/abstract=3055968

Michael D. Nolan

Milbank, Tweed, Hadley & McCloy ( email )

United States

Freddy G. Sourgens (Contact Author)

Washburn University - School of Law ( email )

1700 College Avenue
Topeka, KS 66621
United States

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